Month: September 2012

Insurance regulator IRDA today slapped a fine of Rs 22 lakh on Kotak Mahindra Old Mutual Life Insurance for violation of various norms, including payment of death claims.

Insurance regulator IRDA today slapped a fine of Rs 22 lakh on Kotak Mahindra Old Mutual Life Insurance for violation of various norms, including payment of death claims.

“I direct the insurer (Kotak Mahindra Life) to remit the penalty of Rs 22 lakh by debiting shareholder’s account, within a period of 15 days,” Insurance Regulatory and Development Authority (IRDA) Chairman J Hari Narayan said in an order.

Kotak Mahindra, the order said, violated the guidelines on group insurance policies by not paying the small value death claims directly to the beneficiary. The insurance company routed the claims through the NGO, instead of paying it directly to the beneficiaries as required under the law.

The insurance company, IRDA said, has violated the guidelines by not paying the death claims on grounds of non-submission of additional documents.

“… It is held that the claim repudiations on the basis of non-submission of requirements called for is violation (of regulation) … and a penalty of Rs one lakh is imposed under the Insurance Act,” IRDA said.

IRDA also advised Kotak Mahindra Life to revise its claim manual procedures in line with the regulations.

The insurance regulator has also hauled up Kotak Mahindra Life for inserting a clause to deny death claims within 3 months from the date of policy in its group insurance schemes.

“The insurer is directed to reopen all such claims which are repudiated because of inclusion of this lien clause and examine and decide on the same. The action taken be confirmed to the IRDA,” the order said.

IRDA also found Kotak Mahindra violating the rules with regard to reimbursement of administrative expenses to master policyholders many of whom were acting as its corporate agents.

Filing income tax return is very easy. Even a ordinary person can also file his income tax return. Government has proposed DTC three years but it was never applied in its original form. There are still certain points required to be changed in it. Some of the changes needed are listed below:

1. Exemptions and deductions

Original DTC proposal

Most exemptions and deductions were not available.

Revised DTC

All the sections of the Income Tax Act are still exist.

Changes Required in DTC 3.0

The average private-sector employee gets 20-30 % of his net take-home salary as tax-free reimbursement. Every month, millions of Indians fill out fictitious bills to claim tax-free reimbursements and allowances. Doing away with these exemptions and deductions will simplify the tax structure and plug tax leakages.

2. Tax slabs

Original DTC proposal

No tax on income up to 2 lakh; up to 10 lakh taxed at 10%; up to 25 lakh at 20%; and 30% tax on income beyond 25 lakh.

Revised DTC

Brought down tax slabs. Basic exemption of 2 lakh; up to 5 lakh at 10%; up to 10 lakh at 20%; and over 10 lakh at 30%.

Changes Required in DTC 3.0

If exemptions and deductions are removed, the tax slabs must also be raised to cushion the taxpayers from the impact. The change will not hit the income tax collections because of the higher income in the tax net.

3. Real estate

Original proposal Of DTC

Removed tax benefits on home loans. Rent presumed at 6% of value. Standard deduction reduced to 20% of rental income.

Revised DTC

Reinstated home loan benefits and did away with 6% presumptive rent. No change in reduction of standard deduction.

Changes Required in DTC 3.0

Any change in tax benefits should be from prospective effect . It would be unfair for existing borrowers if the rules are changed midway. The presumptive 6% rent checks tax leakage and should be reinstated.

4. Capital gains

Original proposal Of DTC

Removed all distinction . All gains were to be uniformly taxed as income. Tax could be deferred by investing in Capital Gains Savings Scheme.

Revised DTC

50% of the long-term capital gains on equities to be tax-free and balance to be taxed at marginal rate. Capital Gains Savings Scheme shot down.

Changes Required in DTC 3.0

The original proposal had simplified the tax structure but the revised bill introduced a complex calculation. A uniform tax on all gains, be it from equity, debt or gold (short- or long-term ), will simplify things.

5. Life insurance

Original proposal Of DTC

Tax benefits only if the cover is 20 times the annual premium.

Revised DTC

No change, but later hinted at lower limit of 10 times the annual premium.

Changes Required in DTC 3.0

Life insurance is the favorite tax-saving option for a lot of Indians. The original proposal had sharpened the focus on life cover offered by an insurance policy. This might make it difficult for people above 40 years to claim tax benefits on life insurance policies, but it will also make people buy life insurance for the right reasons and encourage longer terms.

6. Tax-saving limits

Original proposal Of DTC

Higher annual tax-saving limit of 3 lakh for an individual.

Revised DTC

Retained the limit, but included in it the home loan benefit of 1.5 lakh. It also set a sub-limit of 50,000 for life and medical insurance.

Changes Required in DTC 3.0

It’s a throwback to the Section 88 era, when the government decided how one should split tax-saving investments. The sub limits should be removed and the allocation of 3 lakh should be left to the taxpayer.

7. Retirement planning

Original proposal Of DTC

One umbrella Retirement Benefit Account (RBA) for all retirement savings of an individual.

Revised DTC

Dropped the RBA because it was difficult to build and maintain such a huge data base for individuals.

Seventh Change Required in DTC 3.0

The RBA can allow the investor to switch between options without any tax implications and withdraw only after he is 60. This flexibility can be an impetus for retirement savings. The excuse given in the revised draft is not tenable.